US economy shrank 0.5% between January and March, worse than earlier estimates showed

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The U.S. system shrank astatine a 0.5% yearly gait from January done March arsenic President Donald Trump’s import taxes astatine slightest temporarily disrupted business, the Commerce Department reported Thursday successful a a downgrade from its erstwhile estimate

ByPAUL WISEMAN AP economics writer

WASHINGTON -- The U.S. system shrank astatine a 0.5% yearly gait from January done March arsenic President Donald Trump’s commercialized wars disrupted business, the Commerce Department reported Thursday successful a downgrade from its erstwhile estimate.

First-quarter maturation sank nether a surge of imports arsenic companies successful the United States rushed to bring successful overseas goods earlier Trump could enforce tariffs connected them. The Commerce Department antecedently estimated that the system fell 0.2% successful the archetypal quarter.

The January-March driblet successful gross home merchandise — the nation’s output of goods and services — reversed a 2.4% summation successful the past 3 months of 2024 and marked the archetypal clip successful 3 years that the system contracted. Imports expanded 37.9%, fastest since 2020, and pushed GDP down by astir 4.7 percent points. Consumer spending besides slowed sharply.

And national authorities spending fell astatine a 4.6% yearly pace, the biggest driblet since 1986.

Trade deficits trim GDP. But that’s conscionable a substance of mathematics. GDP is expected to number lone what’s produced domestically, not worldly that comes successful from abroad. So imports — which amusement up successful the GDP study arsenic user spending oregon concern business — person to beryllium subtracted retired to support them from artificially inflating home production.

The first-quarter import influx apt won’t beryllium repeated successful the April-June 4th and truthful shouldn’t measurement connected GDP. In fact, economists expect second-quarter maturation to bounce backmost to 3% successful the 2nd quarter, according to a survey of forecasters by the information steadfast FactSet.

Thursday’s study was the Commerce Department’s 3rd and last study connected first-quarter growth. The archetypal look astatine April-June GDP maturation is owed July 30.